I was trolling the web a while ago and I came across an interesting article on stock buybacks by fortune 500 companies. basically it works this way: executives are compensated with stock otpions and the only way such executives can make a profit when they excercise their options is to pump the company money into the stock market to prop up the stock price. They lay off hundreds of employees and ruin millions of lives just so a few people can line their pockets. The next logical question comes to mind, are some of these executives managing businesses or managing stock prices?. The problem we have is outsourcing, but it would not be so much of a problem if America were not held hostage to a cabal of greedy executives and wall street types. For us to to get out of the problems we have today, there should be a radical rethink of executive compensation.
Can you blame executives for a country with a billion hunrgy people wanting to make a living? Many of the billion don't have running water or electricity. They are forcing their poverty on others. When the supply of labor becomes huge, the value of labor plummets. [ February 17, 2004: Message edited by: Rufus BugleWeed ]
The sad thing is that what you describe is a not a very good executive. Companies that tend to do massive layoffs for anything other than a merger also tend to continue to fare poorly. Layoffs help the short-term, but unfortunately it doesn't always help the long-term and often hurts more than it helps. It looks good from a stockholder standpoint, but what happens in reality is that you almost always end up losing people that were essential to the company's success. You either end up hiring those people back (and usually for more since they may be a bit gunshy now) or hire people to replace them and deal with the costs of ramp-up and training. In reality, there are usually better ways to cut costs with more long-term benefits. However, those methods won't see the same immiediate gains in stock price. Because I have worked for them, I am reluctant to name anyone specifically, but I have noticed that companies who use layoffs as a last resort tend to stay stable over the long-term. Those are usually the companies with very top notch talent in the lead and your typical "five year CEO and gone" execs can't touch. The second problem is that many C-level executives get compensated even if they are forced to leave. This, to me, is insane. Why are we agreeing to pay money to people for costing the company money? I know it's usually part of an agreement, but it makes little sense. These executives cost people jobs, who receive next to nothing for the failure of management above them. This is an issue that is a particular sore spot with me, as I have seen many people burned by lousy execs. The execs get another job in a couple of months after they collect hundreds of thousands (if not millions) in severance while employees underneath them will be lucky to collect 3 months salary and find another job in that timeframe. The final issue, which really is the most asinine, is the compensation packages paid out to executives who already command high dollar salaries. An executive at one of my former employers earned $2 million in bonuses one year, and his regular salary alone would pay for roughly 7 to 10 IT workers underneath him. Yet when they started talking about pay cuts and layoffs, do you think he took a paycut or stopped getting bonuses? Wait, how is an exec getting bonuses if the company is so bad they have to lay people off? Something wrong with this picture perhaps? There is definitely an imbalance at play here. How do we fix it? I think a lot of white collar workers were afraid to speak up about it because they were afraid it might hurt future employment prospects, not to mention I know quite a few who would like to become one of those execs one day. They might be speaking out against compensation for a position they'd like to have and think they have a shot at achieving.
I'd argue that even layoffs in cases of mergers can be trouble. Layoffs are often done using a decision process that's more based on politics than productivity - once a company gets over a certain size, the executives no longer know who's really productive. But I get less and less interested in Big Business every day. As an employee, every merger reduces your benefits to the lowest common denominator. As a customer, you see the people you used to get help from replaced by automated phone systems and outsourced personnel who, even if they do speak English don't actually know or care what goes on in the outsourcing company. And as a consumer, you end up with the same bland limited choices in merchandise from Miami to Minsk to Mumbai.
Science is the process of replacing what we "know" with what is TRUE. Politics, alas, often prefers to be the opposite.
Originally posted by Tim Holloway: I'd argue that even layoffs in cases of mergers can be trouble. Layoffs are often done using a decision process that's more based on politics than productivity - once a company gets over a certain size, the executives no longer know who's really productive.
Well, that's a bit unfair. A company may choose to close down a division. It's not a reflection on any one individual's productivity. Some companies try to help their employees transfer to a new division and the better ones sometimes can find jobs elsewhere in the company. --Mark